Interim
Joint Committee on Education

Minutes
of the<MeetNo1>1st Meeting

of
the 2009 Interim

<MeetMDY1>June 8, 2009

The<MeetNo2>first meeting of the Interim Joint
Committee on Education was held on<Day>Monday,<MeetMDY2>June 8, 2009, at<MeetTime>1:00 PM, in<Room>Room 149 of the Capitol Annex. Senator Ken
Winters, Co-Chair, called the meeting to order, and the secretary called the
roll.

Senator Winters introduced and welcomed the new members of
the Interim Joint Committee on Education. He noted that the subcommittee
membership lists were located in the members’ folders as well as a copy of the
tentative schedule of meetings for the 2009 interim.

Senator Winters introduced Ms. Mary Lassiter, State Budget
Director, who gave an overview of Kentucky’s revenue picture and the potential
impact of America Recovery and Adjustment Act (ARRA) Funds. Ms. Lassiter
presented a PowerPoint presentation and responded to questions from members.
Highlights of the presentation included the proposal to balance fiscal year
2010 by requiring no new taxes; using stimulus funds to avert severe cuts;
preserving priorities of education, health care, public safety and economic
development; reducing spending from budgeted levels; restructuring outstanding
debt; enhancing revenue collections; suspending pay for certain state holidays;
and adding required funding in limited areas.

Senator Kelly asked if the Support Educational Excellence in
Kentucky (SEEK) per pupil guarantee of $3,866 was to the base amount in the
budgets and not to the school districts. Ms. Lassiter said that was correct.

Representative Collins asked if the additional funding for
vocational rehabilitation funding had to be matched with federal dollars. Ms.
Lassiter said there is no state match associated with the additional $9.32
million in vocational rehabilitation state grants, and this should be helpful
to mitigate some of the challenges the program has faced. Representative
Collins asked what the state budgeted for vocational rehabilitation in the past
budget. Ms. Lassiter said she did not have the figure committed to memory, but
thought around $12.8 million. Ms. Lassiter explained these funds were in
addition to the money regularly budgeted for vocational rehabilitation.

Representative Rollins asked if the increased education
funding in the educational technology state grants could be money used to cover
the cost of the KIDS information data system. Ms. Lassiter was not sure. Mr.
Larry Stinson, Acting Deputy Commissioner, Learning and Results Services, Kentucky
Department of Education (KDE), said he is not clear on how to answer that
question either, but 50 percent of the money will be distributed according to
formula, and the other 50 percent can be by grant to school districts. He said
this is one item that the KDE is awaiting additional guidance from the federal
government on exactly how the money will be processed. Representative Rollins
asked Mr. Stinson if they were going to try and find money for KIDS, and he
said the KDE is looking for sources of funding for KIDS in every place that is
appropriate.

Representative Carney asked if Title I funds could be
utilized to help school districts cover the one percent or step raises for
faculty and staff. Ms. Lassiter explained that Title I funds have very strict
guidelines and cannot be used to cover raises. However, more dollars in
targeted programs can possibly help school districts deal with the raise issue
indirectly.

Senator Winters asked about increased money budgeted for
prosecutors and not for public defenders in fiscal year 2010. Ms. Lassiter said
the government’s proposal is to honor the enacted appropriation for public
defenders and they were scheduled in the budget to receive more funding in 2010
than in 2009. She noted the prosecutors were straight-lined from 2009 to 2010,
and that is why there is additional funding proposed for them.

Senator Shaughnessy asked if Kentucky was just getting by
with the alcohol and cigarette tax increase dollars and stimulus funds. He
asked if Kentucky would find itself in a billion dollar budget deficit again in
three years. Ms. Lassiter said a slow growth recovery is predicted, but it will
fall far short from meeting current expenditure needs. She said by fiscal year
2012, all the stimulus money being used to balance the budget will be gone and
she said there will be a significant challenge to meet. Senator Shaughnessy
said Kentucky is basically treading water. Ms. Lassiter said the choices are to
raise revenues or significantly cut spending. She noted $600 million has
already been cut from spending levels over the past 18 months and the Governor
decided it was appropriate to use the stimulus dollars to avoid severe cuts to
education, healthcare, and public safety.

Representative Rollins asked about the suspension of three
to five paid holidays for state employees depending upon their salary. He did
not understand the reasoning for this because this is offsetting any benefit
the employees would receive from the one percent pay increment. Ms. Lassiter
said there have not been significant layoffs for state workers and by freezing
these holidays it ensures that state workers will not be laid off. The decision
was made to preserve jobs and she noted the one percent raise has a compounding
effect over time for salary and retirement purposes and that is why it was kept
intact. Representative Rollins noted that there have not been direct layoffs of
state workers, but state government has had high attrition levels over the last
four or five years. He said he feels there is a better way to handle the
budgetary problems and will be working on offering different solutions.

Senator Winters introduced Mr. Stinson and Mr. Larry Taylor,
Director, Division of Exceptional Children Services, KDE, to give the status of
program budgets and the use of ARRA funds. Mr. Taylor began the PowerPoint
presentation by explaining that Title I and the Individuals with Disabilities
Education Act (IDEA) were the two federal programs that were selected to be
able to flow the stimulus dollars through to the local school districts.

Mr. Taylor said the Title I ARRA funds are one-time, and
school districts should not put systems in place that are dependent upon this
money. He noted Title I funds must be spent within a federally-mandated,
27-month timeframe. He explained the three parts of the Title I formula in
detail and the information is located in the meeting folder located in the
Legislative Research Commission (LRC) library.

Mr. Taylor said the large one-time increment in IDEA funding
must be used consistently with current IDEA statutory and regulatory
requirements. IDEA funds are to be used for the excess costs of educating
students with disabilities. IDEA ARRA funds flow through to local school
districts and do not increase the amount that the state may set aside for state
level activities and must be separately tracked and reported. He said systems
currently exist that track and report the regular IDEA funds. The awarding of
regular and ARRA IDEA funds went to school districts on May 1, 2009. School
districts have 50 percent of IDEA ARRA funds available currently, and the
second 50 percent will be made available on October 1, 2009.

Mr. Stinson discussed the State Fiscal Stabilization Fund (SFSF)
and other competitive opportunities available to districts. Kentucky received
$651,341,789 in SFSF dollars and there is $5 billion available in competitive
grants nationally. He said 81.l percent of the SFSF goes to education and is
required to be distributed through the state’s primary funding formula to
restore support to K-12 and higher education to the greater of 2008 or 2009
levels for 2009, 2010, and 2011. If insufficient to restore both, must be
apportioned between both K-12 and higher education based on the relative
shortfalls at each level. He noted the other 18.2 percent will be distributed
to general governmental services.

Mr. Stinson said the first 67 percent of the funding formula
will be provided to the state upon submission of the approved application,
which is due July 1, 2009. The remaining 33 percent is expected to be
available by September 30, 2009. The state must have an approved plan that
meets specific criteria in order to receive the remaining 33 percent of the
money.

Mr. Stinson explained the SFSF competitive grants and other
possible ARRA funds. A specific list of the grants and the awarding process are
located in the meeting folder in the LRC library.

Senator Winters introduced Mr. Robert L. King, President,
and Dr. John Hayek, Vice President for Finance, Council on Postsecondary
Education (CPE), to give an update of the ARRA and Kentucky Postsecondary
Education. President King said college applications are up significantly for
the fall of 2009 for a number of public postsecondary institutions. He said net
general funds to universities and the Kentucky Community and Technical College
System (KCTCS) have been cut $78 million or 7.2 percent over the past 18
months. He noted that the CPE worked with institutions to moderate growth in
tuition with the lowest rate increases in a decade.

President King said the ARRA stimulus bill has impacted
Kentucky Postsecondary Education in three ways. They are: 1) Funds distributed
by formula in the form of grants to states; 2) Funds distributed via
competitive grants, and 3) Funds distributed directly to individuals.

President King said over $1 billion in federal
education-related program funds is available in state grants for mostly K-12
programs. Approximately $533 million of Kentucky’s share of the SFSF will go to
K-12 and higher education. He said the Governor’s plan calls for approximately
55 percent of the SFSF, in combination with general funds, to be used to keep
public postsecondary education and K-12 at current funding levels for FY10. He
also said Kentucky is required to establish a longitudinal data system to track
students from K-12, to college, and ultimately, to the workforce, as an
assurance for SFSF.

President King said there are billions of dollars to be
distributed via competitive grants from various federal agencies. He said the
CPE coordinated a process to gather multiple-institution and
institution/industry collaborations. Workgroups were formed in seven key areas:
Energy and sustainability; Homeland security; E-Health; Technology and
networking; College readiness; S.T.E.M.; and NASA/space science. He said 58
concept papers were generated to compete for ARRA grants in the seven key
areas.

President King said Pell Grants for low-to-moderate income
families will increase significantly, from $4,731 to $5,350 in FY10 and $5,550
in FY11. The American Opportunity Tax Credit, which will replace the Hope Tax
Credit, will increase to $2,500 per year for direct educational expenses. He
said federal work study funds to Kentucky will increase by about $2.6 million.
It was noted that approximately $234 million in Pell Grants were awarded to
87,906 Kentucky students in 2007-2008.

President King discussed cost containment and avoidance
strategies implemented by campuses and universities across the Commonwealth. He
said they reduced faculty and staff by over 700; made changes to various
employee benefits saving over $32 million; restructured academic and administrative
units saving over $25 million; increased participation in joint purchasing
agreements saving over $7 million; restructured debt service saving over $15
million; and engaged in new energy contracts and initiatives saving over $5
million. He said recent general fund cuts have resulted in increased operating
efficiencies, internal reallocations, and additional cost containment measures.
He gave some specific examples of need and merit-based aid at UK and UofL,
comprehensive universities, and KCTCS by student type and family income.

Ms. Ellis said the stimulus funds add $500 to the Pell Grant
in academic years 2009-2010 and 2010-2011. She said the stimulus funds also add
approximately $2.6 million in Federal Work-Study funds for Kentucky students.
She explained the eligibility requirements for students to receive Pell Grants
in Kentucky and projected 84,047 Kentucky students would received a Pell Grant
in 2009-2010.

Ms. Ellis explained the coverage of tuition and fees by the
Commonwealth Access Program (CAP) program and maximum and average Pell Grants
at Kentucky Postsecondary schools. She also discussed the CAP and the Kentucky
Tuition Grant (KTG) disbursements and unfunded awards. There is a detailed and
comprehensive graph located in the meeting folder in the LRC library.

Mr. Ackinson discussed the fiscal year 2010 budget proposal
to eliminate the Federal Family Education Loan Program (FFELP). He said all
student loans beginning in 2010-2011 would be made through a direct loan
program. Reconciliation instructions for student loans direct the committee to
share $1 billion from programs under their jurisdiction for fiscal years
2009-2014. He said the committees must report recommendations by October 15,
2009. Federal lawmakers are likely to seek those savings through major changes
in FFELP, perhaps eliminating it altogether.

Mr. Ackinson said many federal lawmakers remain wary of
efforts to end FFELP. He said KHEAA and the Kentucky Higher Education Student
Loan Corporation (KHESLC) are doing everything they can to ensure Kentucky
agencies maintain an important role in the federal student loan programs and
continue to provide valuable programs and services to Kentuckians.

Mr. Ackinson said the best alternative for Kentucky would be
a modified FFELP program, rather than the elimination of the program, that
would best serve Kentucky students. He said KHEAA and KHESLC could continue to
earn revenue to reinvest in Kentuckians by providing borrower benefits,
additional student aid awards, administrative costs of state student aid
programs, and college access and outreach programs. In the absence of a
modified FFELP program, state-based services would achieve the objectives of
the President’s proposal. If FFELP is eliminated, KHEAA and KHESLC have
proposed that all federal student loans made in a state be originated,
processed, and serviced by the state’s public nonprofit agency.

Mr. Ackinson said Kentucky faces several obstacles. He said
the servicing of student loans would be contracted to private entities;
however, the United States Department of Education (USDE) has limited loan
servicing contracts to the six largest loan servicers, five of which are
for-profit entities. KHEAA and KHESLC have been given no indication that
state-based nonprofit organizations would be provided an opportunity to serve
their states. He noted congressional action will be needed; the USDE has not
demonstrated a willingness to work with smaller, state-based nonprofit agencies
such as KHEAA and KHESLC.

Mr. Ackinson noted the many items that Kentucky’s
educational system would lose without KHEAA and KHESLC. Kentucky would lose the
additional funding for state student awards from the state’s financial aid
programs, which was $5.6 million in 2008. He said borrower benefits to reduce
the cost of borrowing to pay for higher education would be gone and cost-free
administration of state student financial aid programs and services. He also
noted losing the free college planning and financial aid publications for high
school students and adults and the employment of over 420 people in Frankfort
and Louisville.

Senator Winters introduced Mr. Joe Meyer, Deputy Secretary,
Kentucky Education and Workforce Development Cabinet, to discuss the ARRA funds
and impact within the cabinet. Mr. Meyer said the total amount of ARRA funds
will be $156,447,816 in the Education and Workforce Development Cabinet.

Mr. Meyer said $44,615,045 will go into the Workforce
Investment Act. This is the primary source of job training money for the state
and is distributed through the local workforce investment boards that are
administered by the area development districts. He said ten percent of this
money will be held for the statewide reserve fund and cannot be used for capital
purposes. He noted the cabinet has received over $284 million in capital
requests from libraries, area technology centers, community colleges, and
colleges for capital projects and there are no funds to honor any of those
requests.

Mr. Meyer said one immediate impact will be a summer youth
employment program that will be fully implemented by June 22, 2009. He said
this program creates 3,000 to 4,000 jobs for young people in the age group of
16-24.

Mr. Meyer said the bulk of the program is the unemployment
insurance fund. He said there are major issues with the solvency of the trust
fund. In addition, as part of the federal stimulus program, the President has
proposed modernizing, updating, and expanding the benefits of the unemployment
insurance program. The Governor has appointed a task force to study both the
solvency issues and to make recommendations whether the state should
participate in the modernization program. The task force recommendations will
be ready in October of 2009 in time for the General Assembly to take action in
the 2010 session.

Mr. Meyer said the Office of Vocational Rehabilitation and
the Office for the Blind are proposed to be subjected to another 2.6 percent
cut during the proposed upcoming special session. He said the 2.6 percent cut
translates to a general fund cut of about $300,000 as well as a 4 to 1 federal
fund match, or a $1.5 million cut to the total agency’s budget. He did say
impact cuts to vocational rehabilitation would be significantly off-set because
of the availability of the stimulus money.

Mr. Meyer said the Office of Career and Technical Education,
which operates 53 area technology centers across the state, has taken the full
brunt of every budget cut so far. He feels the area technology centers are a
program worthy of being funded. He also said the Education Professional
Standards Board (EPSB) is subject to being cut again and they are significant
in providing teacher quality programs and teacher and principal training. He
said there are no stimulus funds to help either of these two agencies.

Representative Collins asked about the cuts to the
Department for Vocational Rehabilitation and to the Carl D. Perkins Center for
next year. Mr. Meyer said they would lose $1.5 million next year from the
agency’s current budget level. He said $8 million is being added back into the
budget in stimulus money and this impacts the offset of the decreased funds.
His concern is that the stimulus money is one-time and will not benefit the
department after next year. He also said the matching funds needed to run the
Carl D. Perkins Center are at-risk.

Representative Stone said it speaks well of Kentucky that it
has found a way not to reduce the SEEK formula in tough economic times. He said
it is a good thing that local support for public schools comes primarily from
the property tax, which does not go up and down like the economy does, even
though people may be having a difficult time paying it. He asked the KDE if the
stimulus money will have a positive impact on the general fund balance in most
school districts.

Mr. Taylor responded to Mr. Stone and said a maintenance of
effort is required each year by a school district to spend a specific amount of
state and local dollars for the excess cost of educating students with
disabilities. If a district met requirements with its annual determinations then
that district has flexibility to be able to reduce the maintenance of fiscal
effort by 50 percent of the increase of this year’s money, which is double what
they received last year. School districts can reduce local and state dollars
spent for educating exceptional children. He does not know the specifics of
Title I dollars, but he thinks the stimulus money will allow school districts
to purchase some things that would have normally been purchased with local
dollars.

Mr. Stinson also responded to Mr. Stone and cautioned that
Title I dollars will still have to be spent according to the authorized
purposes as well as the dollars spent within the IDEA. He said local school
districts will not be able to shift something that is currently being paid out
of general funds into those sources with the exception of the 50 percent
off-set.

Representative Stone asked if there was any feel of the
impact for the step increases and the 1 percent raises. Mr. Stinson said there
is no data for this year. In the past, school districts have shared that step
increases where staff receive additional dollars for years of service, or
because they have enhanced their rank in education, can be as much as 1 to 3
percent increase in salaries for those individuals. He said personnel costs
attribute from 75 to 82 percent of a school district’s budget. He said a 1
percent raise in schedule can mean a 2 or 4 percent increase in personnel costs
for a school district.

Representative Rollins asked if the stimulus dollars have to
be spent in 27 months or committed within 27 months. Mr. Taylor clarified that
it has to be spent or obligated by September 2011 and obligations have to be
paid by December 2011.

Representative Wuchner asked about possible funds that could
fund the Infinite Campus. She said the school districts were just billed $6.31
per student and now there is an opportunity for some matched funds for
technology. She asked if the ARRA or SFSF funds could be utilized to fund the
$6 million cost of the Infinite Campus. Mr. Stinson said there is nothing
available at this point that can be used at the state level, however districts
could use the dollars that flow to them. He said school districts will have to
be careful utilizing dollars from Title I or IDEA that had very specific uses.
Representative Wuchner asked about KDE offering school districts the
opportunity for a $10 match fund for technology. She said her school district
was asking to do a $4 dollar match instead of $10 out of their general fund and
hopes that KDE will consider this request as general funds are still limited.

Representative Graham asked KDE if they were still planning
on paying the maintenance fee for Infinite Campus for school districts. Mr.
Stinson responded that it was KDE’s intent that the cost would not be passed
along to school districts but after a review process, this was not feasible. He
said the matching process is the best resolution that KDE can offer at this
time. Representative Graham feels this is unfortunate and local school
districts will be hard pressed to find this funding. It also furthers their
disappointment in KDE’s decisions with implementing mandates that are not
funded.

Representative Wuchner asked the KDE to come up with an
additional plan as everyone is disappointed in this decision. She noted that it
is in reflected in meetings that Infinite Campus was very expensive and KDE’s
original intent to bond the cost was lost with the budget constraints and
passed on to the local districts. She said local school districts are under
great constraints right now and would like to see a new plan on the billing of
Infinite Campus costs.

Representative Carney discussed his concern about Infinite
Campus. He feels that the KDE and local school districts should work together
to find a compromise in this situation.

Representative Rollins asked CPE President King about figuring
the cost of attendance and about the 38 percent of students reflected on the
chart that are financial aid recipients with no income information available.
He wants to know who they are and what kind of aid they receive. President King
said these are students who have not filed the Free Application for Federal
Student Aid (FAFSA) form, but who have received merit-based aid either through
KEES or from the universities or campuses directly. He also said the cost for
room and board was not included in the chart because he feels this is not a
direct cost of college as people would have to pay for room and board in the
workplace as well. He said they focused on expenses that were singularly
related to college attendance. This does not include the loss of income of
individuals who choose to go directly into the workplace and not attend
college. Representative Rollins said he agrees to an extent, but people cannot
attend college and live outside and not eat. He said students need certain
basic needs met and these costs are figured in the cost of attendance.

Representative Siler said he is upset over the loan
forgiveness program for the “Best in Class” program. He said the legislation
passed took care of the interest payments for the current year, but does
nothing to relieve families and teachers of long-term obligations. He asked if
any of the stimulus money could be used for the “Best in Class” forgiveness
program that Kentucky sold with good intentions, but fell short in compliance.
Ms. Ellis responded that the stimulus money is not eligible to be used for the loan
forgiveness programs. She said most of the stimulus funds are directed toward
certain federal programs that are already in place or other types of
initiatives. Representative Siler asked if the competitive application program
under additional opportunities would qualify to cover loan forgiveness debts.
Mr. Ackinson said KDE officials would have to address that question. He noted that
KHEAA and KHESLC have no control over administration of general funds. He said
they can only address revenues over the programs they administer and he assured
him they remain dedicated to use all available revenues to off-set the borrower
benefits in the “Best in Class” program.

Mr. Stinson gave a brief presentation on the implementation
of HB 322 that was passed in the 2009 Regular Session relating to disaster days
in school calendars. He gave a brief history and noted this bill was passed to
provide assistance to school districts in fulfilling calendar requirements when
dealing with excessive days missed due to inclement weather such as hurricanes
and ice storms. He mentioned that most requests were approved within the 10-day
timeframe, however in some instances, decreased staff made it impossible to
make a decision within 10 days. He said most of the decision-making on KDE’s
part was ensuring that the district was in compliance with requirements in
other statutory laws such as whether they had used all the make-up days they
had intended to use for that school year. Senator Winters commented that
several school districts were frustrated by not receiving approval or
disapproval of their amended calendar within the 10-day timeframe.

Mr. Phil Rogers, Executive Director, Ms. Alecia Sneed,
Director, Legal Services Division, and Dr. Marilyn Troup, Director, Education
Preparation Division, EPSB, explained administrative regulation 16 KAR 5:010 -
Standards for accreditation of educator preparation units and approval of
programs. Ms. Sneed said the proposed amendment transfers responsibility for
reimbursing the State Accreditation Board of Examiners team members for travel,
lodging, and meals from the EPSB to the institution seeking accreditation. The
amendment incorporates by reference the current edition of the “Professional
Standards for the Accreditation of Teacher Preparation Institutions” issued by
the National Council for Accreditation of Teacher Education (NCATE).

Senator Winters discussed the NCATE process compared to the EPSB
accreditation process. Ms. Sneed said the institutions pay for the NCATE team
and the EPSB pays for the state members. She said now all members will be paid
by the institutions. Senator Winters asked if NCATE had a companion group that
accompanies the EPSB team and Ms. Sneed said not for state accreditation and
only if it is a joint state and NCATE accreditation.

Representative Rollins asked who makes the travel
arrangements. Dr. Rogers said the university makes the travel arrangements and
this is the reason for making the change in the regulation. Dr. Troup said her
division actually assigns the board of examiner team and the institution
informs the division which hotel they will be staying in and this is checked
out. She said there have not been any conflicts or problems in the past.

Senator Winters asked if all eight public institutions were
accredited by the NCATE board. Dr. Troup said yes. Dr. Rogers clarified that
state employees are not reimbursed by the institutions and said it is only
volunteers from other universities who are there to serve on the board of
examiners. Senator Winters asked how many individuals typically are there to
volunteer. Dr. Troup said it depends on the size of the institution, whether it
is a joint visit with an outside team or a state only visit, but usually
between four and six members.

Mr. Kevin Brown, General Counsel, and Mr. John LeFevre,
Financial Analyst, KDE, explained 702 KAR 3:090 – depository bond, penal sum.
Mr. LeFevre said this regulation amends the process for designating depository
bonds. The proposed amendment deletes obsolete language relating to collateral
requirements and requires a board of education to determine the penal sum of
the bond of depository at least 30 days prior to the depository entering upon
its duties and retains the July 1 deadline of each fiscal year. He said this
provides more leniency to banks and allows them to move collateral up and down
as the balances change on a day to day basis.

Representative Stone asked it this changes the nature of
what the collateral must be. Mr. LeFevre said it widens the collateral.

With no further business before the committee, the meeting
adjourned at 3:30 p.m.